EDUCATION AND THE PUBLIC BUDGET

1. EDUCATION AND THE PUBLIC BUDGET Emmanuel Jimenez Budgetary Processes & Public Expenditure Course May 2000

2. Education and Policy: Principles • Correcting for Market Failures • Addressing Inequities • Overcoming Implementation Problems

3. Correcting for Market Failures • Private returns to education are high • So, why should the government spend? • Do these reasons hold for all types of education?

4. Private ROR to Educ Earnings Upper Level Benefits Lower Level Opp Costs Time/ Age in yrs Direct Costs

5. Private Rates of Return

6. Market Failures in Education • Externalities: • Productivity • Nation-Building • Imperfect capital markets • Imperfect information

7. Market Failures in Education • Primary education: Strong externalities • productivity (effect of Green Revolution) • nation building (literacy/numeracy) • Higher education: • capital market failures • no externalities except for research • Technical education: none • Secondary: ???

8. Inequity in Education • Inequity in outcomes • Inequity in access to services and subsidies

9. Inequalities in education outcomes Median grade attained by 15-19 year olds: Richest 20 percent Mali 1995-96 Mozambique 1997 Brazil 1996 Kenya 1998 Bolivia 1997 India 1992-93 Philippines 1998 Egypt 1995-96 0 2 4 6 8 10 Grade

10. Poorest 40 percent Inequalities in education outcomes Median grade attained by 15-19 year olds: Mali 1995-96 Mozambique 1997 Brazil 1996 Kenya 1998 Bolivia 1997 India 1992-93 Philippines 1998 Egypt 1995-96 0 2 4 6 8 10 Grade

11. India 1992-93 Indonesia 1997 100 100 80 80 60 60 40 40 20 20 0 0 9 1 3 5 7 9 1 3 5 7 9 Grade Grade Patterns of educational attainment across countries Percent of 15-19 year old cohort that has completed each grade Brazil 1996 100 80 60 40 20 0 1 3 5 7 Grade

12. Poorest 40 percent Richest 20 percent Brazil 1996 India 1992-93 Indonesia 1997 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 0 0 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 Grade Grade Grade Patterns of educational attainment across countries Percent of 15-19 year old cohort that has completed each grade

13. Proportion of Public Subsidy Received by Poorest Quintile Colom: 92; Kenya: 92/3; Ghana 91/2; Indon, Malay 89

14. Market Failures in Education • All levels of education have high private returns. • But social returns vary: • Primary education high: • Strong externalities • Strong equity effects • Higher education probably low: • capital market failures • Weak externalities except for research • Costly for the public sector to produce • Weak equity effects • Technical education: weak; Secondary: ???

15. Tertiary is more costly than primary education

16. Directions for reform • Re-think role of government: private-public; fiscal costs. • Reorient public investment to primary education; be selective in higher levels (better targeting, user chgs)

17. Allocation of Education Budgets

18. Misallocation within subsectors: system-wide • Poor quality, diagnosed as low levels of non-salary inputs: lack of texts, materials • High unit costs • little incentive to minimize costs • teachers also lack incentive to perform well

19. Private Schools deliver better education at lower cost Ratio of private to public cost and Achievement

21. Addressing Implementation and Governance • Private-public partnerships • Decentralization • Demand-side financing

22. Pros Devolves responsibility to where there is most inform. More flexibility in meeting local needs Motivates users to be involved in delivery Cons May lead to inequity may be too onerous for those with low admin capcacity may lead to scale diseconomies Decentralization of education

23. Decentralize to where? • Center • Region • State/Province • District/Municipality • Neighborhood/facility (school or clinic)

24. Decentralize which function? • Set educational structure • Set curriculum • Formulate pedagogical plan • Hire/fire teachers • Hire/fire administrators • Promotions • Set class hrs by subject • Select textbooks • Evaluate students • Set fees, etc. etc.

25. Decentralization: General Lessons • No firm evidence that decentralization to other tiers of government leads to efficiency gains that counteracts equity losses. • Most of the evidence on gains is decentralization to facilities or local neighborhoods (school based management, etc.)

26. El Salvador School governance to community associations: hire/fire teach, adm gov funds Members elected from community Legally responsible for operations Nicaragua School governance to school council Members include director, teachers, parents Addn’l resources retained at schools Two Cases of Education Decentralization

27. Decentralization: Lessons from 2 cases • Decentralization does not lead to worse student performance; but evidence on gains depends on other factors. • Decentralization leads to greater participation by parents and associations in school governance; this leads to better teacher performance and student gains in achievement.

28. El Salvador Achievement Results * Without: w/o school input and community participation variables; * Significant at 5% Values are in terms of Raw Scores (Averages are 4 and 2)

29. EDUCO Effect on School days missed due to teacher absence Avg # of days missed: 1.34

30. 5 4.5 4.5 4 4 3.5 3.5 3 3 2.5 2.5 2 2 1.5 1 1.5 0.5 1 0 0 EDUCO Tradi EDUCO Tradi tional tional • Local participation Hours/month teachers meet with parents Number of ACE visits to the classroom

31. Countries where enrolment ratios have declined in the 1980s • Benin • Guinea-Bissau • Ghana • Mali • Sierra Leone • Nigeria

32. Definitions of Mechanisms • Stipend • Community Financing • Targeted Bursaries • Vouchers • Public Assistance to Private Schools • Student Loans • Community Grants